* Bloomberg…

Illinois’ $400 million municipal bond sale Wednesday is the first in a string of sales from issuers in the Land of Lincoln this month as the state’s cost to tap the $4 trillion market has shrunk following an improved outlook on increased revenue and billions in federal aid.

“Illinois was able to get much improved spreads in rates compared to where they were a year ago based upon their more positive outlook and the strong demand for incremental yield in the market right now,” said Dan Solender, director of tax free fixed income investments for Lord, Abbett & Co., which holds $36 billion in muni assets including Illinois debt. Deals this week also are benefiting from a drop in Treasuries, he said.

The state sold $400 million in tax-exempt bonds through a competitive deal and saw the penalties over benchmark municipal securities drop sharply from a year ago, according to data compiled by Bloomberg. Morgan Stanley purchased one $200 million series with spreads ranging from 17 basis points for debt maturing next year to 52 basis points for bonds due in 2031 with 5% coupons. Barclays bought the remaining bonds with spreads ranging from 54 basis points for debt with a 5% coupon maturing in 2032 to 116 basis points for bond due in 2041 with a 3% coupon.

Around this time last year Illinois paid much more to borrow from the muni market. In October 2020, a competitive tax-exempt sale by the state drew spreads ranging from 97 to 294 basis points. At that time, Illinois was feeling pressures from the pandemic layered on top of years of self-inflicted financial woes.

* Paul Chatalas, Director of Capital Markets for the State of Illinois…

Our credit spreads were less than half of those on our last GO sale, which were the strongest in many years, and this provides a lower cost of borrowing to the State and its taxpayers.

The spreads on the last sale were the lowest since 2014, just before the Rauner impasse began.

* So I asked for an updated historical comparison on this sale. Carol Knowles at GOMB…

(P)ricing was the lowest relative to rest of the market in at least a decade (back to 2012) and at very low overall interest costs as the whole market is at historically low levels.

* Background…

[Yesterday] the State of Illinois sold $400 million of tax-exempt General Obligation bonds in two series via competitive bid.

The Series of December 2021A bonds, maturing in 2022 through 2031, received 12 bids and the bonds were awarded to Morgan Stanley & Co. LLC with a true interest cost of 1.299 percent.

The Series of December 2021B bonds, maturing in 2032-2041, received 10 bids and the bonds were awarded to Barclays Capital Inc. with a true interest cost of 2.495 percent.

In the 10-year maturity, the winning bid has a credit spread of +54 basis points to the tax-exempt benchmark with a 5 percent coupon, a 66 basis point improvement from the State’s GO March 2021 sale and a 214 basis point improvement from the State’s GO October 2020 sale. The State’s continued improving credit and strong investor demand allowed the State to lock in an extremely attractive overall borrowing rate of 2.15% on a bond issue that has a 20-year final maturity. […]

Approximately $175 million of the bonds will help finance the state’s ongoing accelerated pension benefit buyout program. The remaining proceeds, after cost of issuance, will fund ongoing construction projects, largely for Rebuild Illinois, the state’s $45 billion capital program.